Thursday, December 1, 2016

USA Patriot Act Disclosure Form and the Freedom Act

QUESTION

We are a lender with a client that is very
passionate about NOT signing the Patriot Act Disclosure that is included in our
initial closing package. He is a permanent resident alien and claims that the
Patriot Act has not been in existence since June 2015 and that a lender should
not be requiring him to sign the U.S. Patriot Act Information Disclosure form. The client has no difficulties with providing
the identification documents we require, but he feels that the disclosure form is
a legal document which is inaccurate, as it is now the Freedom Act that
governs. Is the client correct and how should we respond?

ANSWER

Actually, the client is incorrect. He is
operating under a common misconception that the entire USA Patriot Act
expired. In reality, the vast majority of the Act, including Title III,
which carries a great majority of the requirements for financial institutions,
remains in effect. Thus, financial institutions are still required to (1)
monitor for customers and transactions that could be related to terrorist
activities through section 314(a) & (b); (2) verify the identity of
customers through a customer identification program under section 326; and (3)
have an established AML Program under section 352.

The sections that “expired” were section 215, which
included the so-called “Lone Wolf” and “Roving Wiretap” provisions. The “Lone
Wolf” provision allowed U.S. intelligence and law enforcement agencies to
target surveillance at suspected terrorists who are not part of any group and
without direct ties to terrorist groups. The “Roving Wiretap” provision
permitted the monitoring of a specific person regardless of the devices used. The
National Security Agency used section 215 as a basis for the mass collection
and monitoring of phone records of millions of Americans who were not
necessarily under investigation, a program Edward Snowden exposed in 2013. The
USA Freedom Act essentially restored and amended section 215 through
2019.

It is not clear which version of the USA Patriot
Act Disclosure form you are using.
However, in all likelihood, just above the signature loan there is a
statement to the effect of “By signing the form, you acknowledge receipt of
this disclosure”. So, the client’s difficulty with acknowledging receipt
of the form is difficult to grasp. If you are keeping the loan in portfolio, depending
on your policies, you could have a documented exception, as there is no legal
requirement that it be signed.

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